The Saturday WSJ has an interesting overview of China; Data junky and chart whore that I am, it it simply too much for me to pass up, even on a weekend:
• China has about $1 trillion in personal savings and a savings rate of close to 50%. The U.S. has about $158 billion in personal savings and an average savings rate of only about 2%.
• Shanghai boasts 4,000 skyscrapers — double the number in New York City. Still, 17% of the entire Chinese population lives on $1 a day. Only about 300 million people in China, or 23% of the population, are considered middle-class.
• Wal-Mart Stores bought $18 billion of goods from China last year. With China’s annual exports amounting to $583 billion, that means Wal-Mart ranks as its eighth-largest trading partner, ahead of Australia, Canada and Russia.
• In China, the 40-richest people are worth a collective $26 billion, up from $18 billion last year. China has 10 billionaires, up from three last year. The richest person is Larry Rong Zhijian of CITIC Pacific Group, who is worth $1.64 billion, according to Forbes magazine.
• China has 100 million Internet users, second to the U.S.’s 135 million users. In September, there were 62 people jailed for violating Chinese Internet laws, up from three in 2001. The word ‘democracy’ is banned in online chat rooms.
• Over the past decade, Russia and Israel have been China’s main foreign sources of weapon systems and military technology. Russia has supplied more than 85% of all of China’s arms imports since early 1990, the Pentagon says.
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Here’s a graphical depiction of China’s increasing economic might:
click for larger graph
graphic courtesy of WSJ
(If you still don’t haven’t access to the online WSJ, what the hell are you waiting for?)
This mighty looking set of data does not mean China is somehow immune from a global slowdown. If anything, the Communist Central Planners have historically not done well in response to a crisis or slowing economy when they were an agrarian nation.
As a newly formed industrial power, it would take even more finesse to manueveur through a global decelleration.
If only a modestly negative scenario unfolds, I don’t think the Commies Central Planners can avoid a hard landing. And in the event of a dramatic economic crash, all bets are off.
Source:
China: Engagement or Containment?
November 19, 2005; Page A5
THE MAIN EVENT
http://online.wsj.com/article/SB113235786964901964.html
Not saying that the 21st Century won’t ultimately become “the China Century” much as the 20th was the “American Century”, but China is setting up for a whopper of a crash.
This volatile mix of extreme growth, wildcat finance, opaque governance and economic accountability, and authoritarian government is a witch’s brew.
Don’t know how or why it will happen. Really doesn’t matter. May only take the flutter of a butterfly’s wings. When the time is right, it will occur.
Maybe the Beijing Olympics will be 21st C equivalent of the 1936 Berlin Olympics. Can’t imagine the Chinese govt will let things fall apart before their global “coming out party.”
But after 2008, all bets are off. I imagine Taiwan will be at the center of whatever chaos is coming. That situation is ripening by the minute.
“China has about $1 trillion in personal savings and a savings rate of close to 50%. The U.S. has about $158 billion in personal savings and an average savings rate of only about 2%.”
Hmmm…smells to me like somebody at the WSJ – at the very least – confusing stocks and flows. The savings rates are right but I beleive 50% is total Chinese economy-wide saving but the US number is personal savings only. Also $158bn in total personal savings in the US? Less than 2% of GDP?Double hmmmm.
(Not disputing the underlying point but those numbers are apples and oranges)
The mutual FDIs in China and the US were interesting contrasts to the usual information given about China’s growing dollar denominated foreign reserves. The MNCs at work.
I’ll second Pol’s comment — 50%/ 1 trlllion is national savings for China, not household savings. national savings are a bit over 50% of GDP actually, given that investment is now close to 50% of GDP and savings exceeds investment if you have a current account surplus. the number jumped out at me as wrong when i read the WSJ article.
Household savings rates — if my memory of the imf data holds – are in the 20% range. That’s a lot higher than in the US (where they are basically zero).
ball park, the US saves about 1/4 as much of its national income as China does (13% v 55% of GDP), and China’s economy is about 1/6 the size of the US, so US gross savings (in $ terms) is a bit bigger than Chinese gross savings. but with the US capital stock depreciating, net savings in the US are close to zero — and they are very positive in China … so in dollar terms, Chinese net savings must exceed those of the US.
Behind the impressive figures of the WSJ, China is highly vulnerable as its economic growth is entirely driven by exports.
Below are statistics quoted from a recent column from the unlinkable South China Morning Post:
“China’s net exports contribute 37 per cent to the growth of gross domestic product, a higher level than any developed or developing nations have ever recorded.
Domestic consumption drives the economies of many major nations. It contributes 78 per cent to the US economy, and 85 per cent of total growth in Japan. By contrast, China’s economy relies 80 per cent on foreign exports.
Despite the illusion created by plush shopping malls in Beijing and Shanghai, the reality is that the mainland’s domestic consumption rate is decreasing, not increasing. The statistics are shocking. In 1981 the consumption rate was 67.5 per cent. That dropped to 60 per cent in 2003, following reforms to the medical, housing and retirement systems. Last year the rate dipped again, to 53.6 per cent, reflecting weakening public confidence in the future. For most nations, the average consumption rate is 80 per cent.”
When (not if) the imbalances in the US are corrected, rest assured that China will be affected.
I can’t believe it. Someone with a realistic perspective on China. The “herd” always believes trends never end. The current trend is China taking over the world. There is no doubt any centrally planned economy will eventually crater. When, not if, that happens, it could literally decimate China to the point of setting them back years. The best case scenario is a slowdown which creates imbalances which will work out within a few years. The worst case is a crisis so severe that the commies lose control. Can you say Soviet Union? China has likely come to far to regress to a police state so the situation could become severe enough to push China to true market reforms whether that be through reform or uprisings.
China will likely never become anything more than it is today, which is a slave labor state, without major changes. And that title is shifting to other nations as the cost of doing business in China increases. In fact, India will surely emerge as the next Asian power in the information/intellectual global economy for many geopolitical reasons. No one in China even speaks English! An exaggeration but a truism.
I’m tired of hearing how China is graduating a billion engineers a year. Centrally planned economies can graduate as many engineers as they wish. What the hell are they all going to do? In a free market, the supply and demand determines long term trends in employment, and thus, graduation rates.
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$158bn in savings? The US household has $4.5trillion in savings accounts and another $900bn in money market funds alone. This actually makes them a net beneficiary of higher short rates. The Flow of funds accounts show that the US household has in excess of $50trillion of net assets, or $34 trillion excluding housing. Because they are getting a real return on this they deem in unneccessary to top it up by “saving” out of current income. You may think it an incorrect assumption, but it is not irrational. It’s all about the balance sheet.
Assets of $34 trillion? (smells like caviar to me) ……Average Credit Card debt- 9400$ (That’s Burgerlicious!)
China’s absolute GDP is middling – it’s lower than that of France, Italy or the UK. As with most emerging market economies (Korea excepted) it’s (still) a cheap labour producer-economy highly dependent on consumer behaviour in more diversified and wealthier economies. Their own consumption is bulimic.
And isn’t that their (main) problem? With most emerging economies (and that’s alot of folks) locked in an internecine battle to export can a country like China with 1.3bn people lift itself into the ranks of the most economically developed without greater domestic consumption?
And that’s before mention of the clearly development-linked social, political or economic freedoms lacking there. They are ranked 94th of 177 nations in the UN Human Development tables (2003).
They still have alot to do put development in all its facets on a balanced footing. Until then sinophobia looks misplaced.